Posted on: 08th Feb, 2008 01:35pm
If your house goes into foreclosure and it sells for less than what you owe on the property, there will be a deficiency. As a borrower, you're liable to pay it off. In case, your lender forgives this deficiency, it'll be considered as your taxable income. You'll be sent a 1099-A Form by the lender and you'll have to report the income to the IRS. Similarly, if your lender modifies the terms of the loan and it results in cancellation of a certain portion of the debt, the cancelled debt amount will be taxed by the IRS.
What is 1099A Form and why is it sent to you?
Your lender is required to report the deficiency from the foreclosure or the short sale to the IRS for tax purposes. This is why they send you 1099-A Form, which is mainly for informational purpose. However, if you receive a 1099A Form, it doesn't mean the deficiency has been forgiven. The lender can come after you in future to collect the debt.
If the lender forgives the debt, you'll receive a Form 1099-C. It suggests that the remainder of the debt has been cancelled and the lender will not come after you to collect the debt. You'll be required to report this as your income on the tax return.
If the lender forgives the debt, you'll receive a Form 1099-C. It suggests that the remainder of the debt has been cancelled and the lender will not come after you to collect the debt. You'll be required to report this as your income on the tax return.
Is there an exemption from paying taxes on this income?
If the mortgage is a recourse loan, you will owe taxes to the IRS on the cancelled debt amount. But the Mortgage Forgiveness Debt Relief Act, 2007 does allow you to exclude the cancelled debt amount from your gross income under certain conditions.
However, in case the mortgage is a non-recourse loan, the lender cannot come after you to collect the deficiency. They have to be satisfied with whatever they get from the sale of the collateral. So, even if there's a deficiency, it will not be considered as your cancellation of debt income. Thus, you will owe no taxes to the IRS due to the deficiency on the non-recourse loan.
However, in case the mortgage is a non-recourse loan, the lender cannot come after you to collect the deficiency. They have to be satisfied with whatever they get from the sale of the collateral. So, even if there's a deficiency, it will not be considered as your cancellation of debt income. Thus, you will owe no taxes to the IRS due to the deficiency on the non-recourse loan.
iT SHOWS WHAT WE OWED AND WHAT THEY SAY WAS FAIR MARKET OR REALY WHAT IT SOLD FOR AT THE AUCTION. SO THE DIFFERENCE WOULD BE INCOME RIGHT? CAN I USE THAT AS A LOST ON MY INCOME TAX FOR MY HOME? NEED HELP
Hi lifesartisit!
Welcome to forums!
The borrower as well as the lender will have to agree to deed in lieu of foreclosure. Unless both agree to it, the deed in lieu of foreclosure cannot take place.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The borrower as well as the lender will have to agree to deed in lieu of foreclosure. Unless both agree to it, the deed in lieu of foreclosure cannot take place.
Feel free to ask if you've further queries.
Sussane
Hello,
I need help on where to file the 1099A information on my 1040 form. Is this income as a sale of a home? Im using HR Block Online to file my taxes....
Thanks,
Kelly
I need help on where to file the 1099A information on my 1040 form. Is this income as a sale of a home? Im using HR Block Online to file my taxes....
Thanks,
Kelly
i just received a 1099-a due to my foreclosure last year and it says i am liable for the whole amount of $500K. how much taxes will i get hit for for an amount of that size? im worried!?
I am walking away from a triplex as of Feb 1. It's been on the market for 3 yrs-no buyer; my income is SS check and a Retirement benefit from deceased husband; I own a home, a vehicle (worth $4000). No other assets. Amt Owed $90,500. If it does sell, it would probably sell in neighborhood of $70 - $60...are you saying that the difference of 20-30 Thousand would be income to me? ? :?: :!:
Hi Kelh,
It will be better if you could contact a tax adviser and take his help in filing your taxes. He will guide you in this regard in a proper manner.
To Empoy,
If the lender has not forgiven the dues, then you are responsible to pay it off. If you pay off the dues, you won't be liable for paying taxes.
To Guest,
If you do not pay off the deficient balance resulting from the property sale, it will be considered as your income by the IRS.
Thanks
It will be better if you could contact a tax adviser and take his help in filing your taxes. He will guide you in this regard in a proper manner.
To Empoy,
If the lender has not forgiven the dues, then you are responsible to pay it off. If you pay off the dues, you won't be liable for paying taxes.
To Guest,
If you do not pay off the deficient balance resulting from the property sale, it will be considered as your income by the IRS.
Thanks
Need some help. Received 1099A from mtg lender for home that was lost in foreclosure, home just sold 9/2010 We declared BK 13 in 6/2009 (have one more payment). If mtg was included in BK why did I get a 1099A. Could someone help. 1099 shows income of 55K, that is twice what I make in a year.
I JUST RECIEVED A 1099-A FORM TODAY, WILL THIS EFFECT MY TAX RETURN THIS YEAR?
Welcome bathomas,
Though you included the mortgage in your bankruptcy filing, the lender had foreclosed the property and sold it off. Thus, you've received the 1099A form. The forgiven debt will be considered as your income by the IRS.
Though you included the mortgage in your bankruptcy filing, the lender had foreclosed the property and sold it off. Thus, you've received the 1099A form. The forgiven debt will be considered as your income by the IRS.
What if you have only lived in the home for 1 year?
for 18 months i paid emc mortgage modified payments only to be told in the end i made too much money for a modification. i challenged that and was told i could reapply for a modification, which i did. emc is now telling me to pay $15000 and they will modify my loan but will give nothing in writing. this is an investment property and in short, i don't believe them but don't know what to do. i have two weeks before the trustee's sale. i don't want a foreclosure but if i pay them $15,000, they may still foreclose. even if they don't, i can't really afford another monthly payment which i would have if i get a loan for $15,000. i only make $150/month on the investment property and it needs attention. it is worth about $140,000 and i already owe $155,000. i'm thinking a deed in lieu of foreclosure would be the way for me to go. unfortunately, i have wonderful tenants who will have to relocate, which i hate to do to them. what do you think?
Hi nemety,
If the property is your primary residence for 1 year, then you'll be able to claim debt forgiveness under the Mortgage Debt Relief Act.
To Guest,
You can apply for a deed in lieu of foreclosure in order to get rid of the property and the mortgage. You should inform the tenants immediately about your plans so that they get ample time to search for a new home in order to move out of the property.
If the property is your primary residence for 1 year, then you'll be able to claim debt forgiveness under the Mortgage Debt Relief Act.
To Guest,
You can apply for a deed in lieu of foreclosure in order to get rid of the property and the mortgage. You should inform the tenants immediately about your plans so that they get ample time to search for a new home in order to move out of the property.
Jessica, my bank wells fargo turned down 3 short sales I had the first being 250k the second 225k and the 3rd being 190k. They forclosed and bought the condo back for $148,000 (148K). They then sent me a 1099a for the difference between the 400k loan and the 148k they bought it back for. Can they do this and do I have any chance of help on this matter . I tried everything to work with the bank and it looks like they never wanted to do business with me back. I read where they have done this to other people too.
Welcome tdp,
After the foreclosure, the lender can claim the deficient balance resulting from the property sale. There is nothing wrong in it.
After the foreclosure, the lender can claim the deficient balance resulting from the property sale. There is nothing wrong in it.
got a 1099 last year for an abandoment for 2009 and filed in 2010 for 2009 tax year. i got another one this year and the difference in the 2 years is that on the new 1099-a it states thati am not personally responsible for this loan(last years stated i was) and the fmv of property went up/ do i have to file this again
Hi lindseylee!
Welcome to forums!
As far as I can understand, as the lender has sent you the 1099-a form, you'll have to file it with your taxes. Nevertheless, you should contact a tax adviser and take his opinion in this matter.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
As far as I can understand, as the lender has sent you the 1099-a form, you'll have to file it with your taxes. Nevertheless, you should contact a tax adviser and take his opinion in this matter.
Feel free to ask if you've further queries.
Sussane